Key facts
- Banks must adhere strictly to police freeze orders and cannot freeze more than the specified amount.
- The Karnataka High Court ruled that banks cannot act on potential future requests when implementing freeze orders.
- Money in a bank account remains the property of the account holder, subject to lawful restrictions.
- The court ordered IndusInd Bank to unfreeze all but Rs 25,000 in a customer's account.
- The ruling emphasized that banks are implementers of orders, not independent decision-makers on freeze scope.
The Karnataka High Court has ruled that banks cannot freeze an entire bank account when police or investigating agencies direct them to freeze only a specific amount. The decision came in response to a petition filed by Madhu, a Bengaluru resident whose entire account was blocked by IndusInd Bank's Kothanur branch, despite police requests to freeze only Rs 25,000 in total.
The court observed that banks are merely implementers of directions issued by competent authorities and do not possess independent powers to enlarge the scope of such orders based on their own apprehensions of future requests. Justice Suraj Govindaraj stated that banks cannot act on assumptions or administrative considerations, emphasizing that money in an account remains the customer's property until lawfully restricted.
The bank had argued that freezing the entire account was a precaution against potential future freeze requests. However, the High Court disagreed, stating that the possibility of future communications cannot justify restricting funds not covered by existing orders. The court directed the bank to limit the freeze to the specified Rs 25,000, allowing Madhu access to the rest of his funds, while also noting that the bank could act on any new directions issued by authorities.